Sina good at maintaining investor relation?

Last month when several US-listed Chinese companies including 51job.com (a leading online job-seeking sevice company in China) and China Life Assurance were involved in the suit and investigation from US regulators, an analyst who covers Chinese Internet companies traded in the United States, told Reuters that the earlier listed Chinese companies like Sina.com did a better job in terms of investor relations. Sina's shareholders had the reason to be happy till Sina's share price jumped down sharply after Sina released the lower-than-expected fourth quarter 2004 financial report. Last friday A US law firm announced the action against Sina last Friday, complaing the company not disclosing the potential risk for the worse-than-expected result.

The case is shunned from the Chinese news media in the excuse of protecting the local company, according to Keso, a famous domestic blogger specialised in IT. But another Sina-related news, that Shanda Interactive, a leading online game company in China, has bought 19.5 per cent of Sina shares and become the biggest shareholder are discussed hotly. Both parties, including Sina and Shanda, kept low profiles on the deal. Sina said on its website that "it had been informed" the news when Shanda Interactive have filed a Schedule 13D(a required document when a group acquires beneficial ownership of more than 5% of a company) with the United States Securities and Exchange Commission, which leaded many Wall Street analysts saying the deal was "most likely done without Sina's knowledge", according to Reuters.

One popular speculation in the market is that Shanda wanted to set up its dream of "entertainment emperor" based on Sina, a leading online media in China. That's the reason why Shanda progressed its unsolicited bid via its large amount of cash flow, without noticing Sina. At last, Sina's management and board had to accept the result. Sina played a word game in its press release saying that the only action reported in the filing is the purchase of shares has no direct effect on the company shareholders. Of course, what indeed matters is Shanda and Sina's future actions.

Till now, Sina has acted most like a victim of the unsolicited bid, though the investigation, especially from US shareholders, is still going on. The accurate timing of the deal is one of the suspected reason. Shanda bought 14.4% per cent of the shares, above two thirds of the whole shares, at the price of 22 to 24 per share, through open market, just a day after Sina's annoucement which leaded to the price's fall. The share price fell down 16 per cent after it announced the fourth quarter report.

But in fact, Shanda began its acquistion before January, the disclosed starting time in its SC 13D to SEC. It owned almost 3.2 per cent of Sina's shares, which is 1,600,890 shares besides the shares it bought through January to February. In the document, Shanda has bought 8,220,875 shares from Jan.12 to Feb.10. But it didn't disclose the time they got the 3.2 per cent shares and the price.

Separately, a dozen of Sina's directors and officers has disposed of their shares or share options after the company announced its profitable third quarter report in October 27, according to SEC's trading reports. Yan Wang, the director and CEO of Sina, has earned almost 5 million US dollars using his priority stock options in Oct 29 and Nov 19. Chiang Daniel, another director, has transferred 277,500 shares, to the account of his wife, son and daughter on Dec.8, a month before Shanda's disclosed acquistion date.


Rumors said that some of Sina's management has helped Shanda to complete the deal. If it is the truth, Sina would suffer from the suit with its shareholders in US, with the crime to help Shanda to buy the shares in a fairly low price and not tell the truth to the investors. In some extent, the case and the subsequent loss will teach Chinese companies how to maintain a right investor relation.